Heavy equipment and the latest technology can be a huge burden on a company’s financing. If a business is looking for a cost-effective method to take on new projects, then it is advisable to streamline current services or replace a damaged piece of equipment. Consider how equipment financing can help.
There is no need to waste working capital on a major expense but keep the cash flow flexible and responsive to any circumstance that may arise.
Equipment can be financed in two basic ways. Either by financing to purchase the equipment outright or choosing to lease equipment. Depending on the type of equipment and the financial situation, there are pros and cons to each financial option.
An equipment loan allows owning the equipment outright. This means that any repairs are the buyer’s responsibility, but it can also be used however the buyer wishes to., without worrying about damaging equipment that belongs to the lender. If deciding on using the same equipment over a long period, a loan will save a lot of money compared to a lease.
Leasing equipment, although, can offer greater flexibility and help avoid the effects of obsolete equipment.
Primarily, leases require no down payment, so it can get started right away with new service or replace the outdated equipment. A lease can have a broad spectrum of term lengths, so it can be chosen to lease a specialized piece of equipment for a short-term project.
Once the lease has ended, there are three basic options.
First
Simply end the lease and move on to another project with a different type of equipment.
Second
it can be decided to purchase the equipment at the end of the lease. There may be required to pay slightly more than a traditional equipment loan, but there will be a discount for purchasing the same equipment leased.
Third
A lease allows for an upgrade at the end of the period. If looking for equipment that routinely becomes obsolete, a lease can prevent the cost of purchasing goods that rapidly devalue. Computers and medical technology are costly but can become outmoded in as little as a year.
Simply leasing this equipment for a year, then sign on with the latest model for the next year.
Equipment financing, either loans or leases, is available for small businesses in almost every industry. Get more knowledge about these flexible financial solutions and avoid spending all the working capital on a single piece of machinery.
